ITALY, GREECE, ALBANIA CONFIRM POLITICAL SUPPORT FOR TAP WITH SIGNING OF MOU

Πηγή: TAP
Sept 28 2012

New York, USA. The governments of Italy, Greece and Albania confirmed their political support for the Trans Adriatic Pipeline (TAP) project with the signing of a Memorandum of Understanding (MoU) yesterday evening.

Concluded on the margins of the United Nations General Assembly meeting in New York, and in the presence of representatives from the US government, the MoU provides TAP with the necessary political support to continue its commercial activities in Italy. Next steps will be to complete regulatory approvals.

Kjetil Tungland, TAP’s Managing Director, said: “We would like to thank the Italian, Greek and Albanian governments for this very clear demonstration of political support for TAP. This is another great step forward for the project and is testament to TAP’s commercial and technical strengths and the significant benefits that it will bring to these countries.

“Today’s signing follows a number of major milestones that TAP has achieved this year, including being the first pipeline to be selected by the Shah Deniz Consortium in February, a Cooperation Agreement with the Consortium in June and the Funding Agreement with BP, SOCAR and Total that was signed in August. We are working to further progress the project in the coming months.”

TAP will take natural gas from the giant Shah Deniz II development in Azerbaijan, via Greece and Albania, across the Adriatic Sea to southern Italy, allowing further transport into Western Europe. Designed to expand the transportation capacity from 10 to 20 bcm per year, TAP will open up the so-called Southern Gas Corridor, which will enhance Europe’s energy security by contributing to the diversification of the region’s gas supplies.

Commissioner Oettinger welcomes the signature of the political agreement on TAP >>
EU Energy Commissioner Oettinger said: "This is another important step towards our aim to get gas directly from the Caspian Region."

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About the Trans Adriatic Pipeline (TAP)

The Trans Adriatic Pipeline (TAP) is a natural gas pipeline project that will transport gas from the Caspian region via Greece and Albania and across the Adriatic Sea to Southern Italy and further into Western Europe. The project is aimed at enhancing security of supply as well as diversification of gas supplies for the European markets. TAP will open a new so-called Southern Gas Corridor to Europe and establish a new market outlet for natural gas from the Caspian Sea and beyond.

The project is designed to expand transportation capacity from 10 to 20 bcm per year. TAP also envisages physical reverse flow of up to 80 per cent and the option to develop natural gas storage facilities in Albania to further ensure security of supply.

TAP’s transportation solution will be approximately 800 kilometres in length (Approx.: Greece 478 km; Albania 204 km; offshore Adriatic Sea 105 km; Italy 5 km). Transport will begin near the Greek-Turkish border (Komotini), cross Albania and the Adriatic Sea, and connect with the Italian natural gas distribution system near San Foca in Italy.

TAP’s shareholders are EGL of Switzerland (42.5%), Norway’s Statoil (42.5%) and E.ON Ruhrgas of Germany (15%).

Greece Seeks Taxes From Wealthy With Cash Havens in London

Real estate listings in the South Kensington area of London. British finance authorities are poring over a list of about 400 Greek individuals who have bought and sold London properties since 2009.

Πηγή: New York Times
By LANDON THOMAS Jr.
Sept 27 2012

LONDON — The London real estate market was abuzz. A wealthy Greek banker wanted to spend up to £60 million (nearly $100 million) for a home, and was in a hurry to make a deal.

Real estate listings in the South Kensington area of London. British finance authorities are poring over a list of about 400 Greek individuals who have bought and sold London properties since 2009.

Real estate agents recall sifting the listings for some of the most prestigious, and expensive, properties in South Kensington, a favored area for London’s international set.

But the house hunter, Lavrentis Lavrentiadis, never made a purchase in the spring of 2011, agents say. Within months his failing institution, a small lender known as Proton Bank, was seized. The Greek government, suspecting that Mr. Lavrentiadis may have moved money out of the country, is now investigating his activities to determine whether he engaged in fraud and money laundering.

Greece, heavily in debt and desperate to track down money wherever it can, is leaving no stone unturned.

Mr. Lavrentiadis has denied the accusations, and his lawyer did not respond to questions about any interest his client might have had in London properties. But the Greek banker’s rumored flirtation with this city’s prime real estate market, and the frenzy it stirred among sales agents, is telling.

At the request of the Athens government, the British financial authorities recently handed over a detailed list of about 400 Greek individuals who have bought and sold London properties since 2009.

The list, closely guarded, has not been publicly disclosed. But Greek officials are examining it to determine whether the people named — who they say include prominent businessmen, bankers, shipping tycoons and professional athletes — have deceived the tax authorities by understating their wealth.

“These people have money and they are known — but it is not clear yet if they have violated any laws,” said Haris Theoharis, an official in the Greek Finance Ministry. Tax investigators have been examining the list to see whether there is any overlap between those who bought London properties and those already identified as being tax cheats.

The Greek government, under pressure from its international lenders to raise 13.5 billion euros ($17.4 billion) through tax increases and spending cuts, is intent on making the well-heeled share the burden. Studies have shown that the country may be forgoing as much as 30 billion euros a year in uncollected taxes, with a significant portion of that amount having been shipped out of the country as the affluent seek shelter from Greece’s financial storm.

This week, the government of Prime Minister Antonis Samaras opened an investigation into the bank accounts of more than 30 Greek politicians to determine whether they should be charged with tax evasion and the illegal accumulation of wealth.

The politicians on the list included the president of the Greek Parliament, Evangelos Meimarakis, creating an embarrassing distraction for Mr. Samaras’s coalition government. Mr. Meimarakis is a former defense minister who has also been implicated in accusations concerning a money-laundering network said to involve two other former ministers.

London, long a magnet for foreign real estate investors, has become a special focus for Greek officials trying to track down money taken from the country.

Bankers say that accounts in Singapore and even in the country of Georgia have become favorite destinations for fleeing funds, more so than the traditional haven of Switzerland, because the looser rules and regulations of those countries about accepting large sums of foreign money. But while Singapore and Switzerland have been reluctant to divulge information about its Greek clientele, the British government has been more cooperative in sharing its real estate records.

There is an air of desperation to this Athens fund-raising drive, which includes leasing out empty Greek islands and even putting up for sale the former residence of the Greek consul general in the tony London neighborhood of Holland Park. But with Greece’s membership in the euro at stake, every conceivable revenue-raising strategy is being pursued, even if it remains unclear how successful it will be.

For the better part of a century, owning a grand London home in Belgravia or Mayfair has been accepted practice for the wealthiest Greeks — shipowners in particular — looking to hedge their bets against their country’s volatile economy. Since 2008, when the country’s problems began to surface, a much broader spectrum of Greek investors has turned to London real estate.

“Greeks are panicking,” said Sandy Triantopoulou-von Croy of EPPC, a real estate firm in London that does a lot of work with Greek clients. “They just do not know what to do with their money.”

Mr. Lavrentiadis was not the only bank chief to dabble in London real estate. Theodoros Pantalakis, a former chief executive of Agricultural Bank of Greece, another ailing lender, caused a stir in Athens this year when it was revealed that in 2011 he transferred 8 million euros abroad with the intent of buying a property in London. Mr. Pantalakis has said that the authorities were informed of the transaction and that the appropriate taxes were paid.

Greek money, along with wealth from China, Russia and various other countries, has kept the high end of London’s property market buoyant despite — or maybe because of — the global financial turmoil. According to research by Savills, a London-based property company, £20 billion of foreign money has been invested in prime residential real estate here since 2006.

The biggest year on record was 2011, when foreigners snapped up £5.2 billion worth of new residences. With economic uncertainty in the euro zone increasing this year, demand for these properties in 2012 shows no sign of letting up, real estate agents say.

Investors from Italy and France have been most prominent in using London properties as a hedge against the euro. But the Greek influx has been especially striking.

Officials in Greece examining these transactions estimate that about 250 Greeks invested more than £100 million in prime London residences in 2009 and 2010, according to records collected with the assistance of the British government. As the crisis grew worse last year and this year, government officials say it is likely that the inflows increased.

Not everyone, of course, was looking for a £60 million manse as Mr. Lavrentiadis was said to have done. Even in London, with its enclaves of billionaire oligarchs and sheiks, such requests do not frequently roll around.

Ms. von Croy says that the average asking price from her Greek clients is about £1.5 million, which is still a significant enough barometer of wealth to attract the attention of the Greek tax authorities.

Experts say it is not only high rollers looking to make a splash. Many of the recent buyers hail from Greece’s professional classes, including lawyers, doctors, accountants and midlevel bankers who are paying £300,000 to £500,000 for modest apartments.

Notably, a recent study conducted by economists at the University of Chicago concluded that it was within this segment of society where most of Greece’s tax collection shortfall occurs.

By delving through bank records, the economists found that Greek professionals — not the truly wealthy, but the comfortably affluent — skirted as much as 28 billion euros worth of taxes in 2009. That would have been enough to cover a third of the country’s budget deficit that year.

Mr. Theoharis, of the Greek Finance Ministry, said London properties represented but a small portion of the billions Greeks had shipped out of their country since 2009. In 2011, according to government figures, Greeks sent 6 billion euros to foreign bank accounts. The data for 2012 is even more stark: for the first half of the year about 5 billion euros left the country, Mr. Theoharis said.

Much of that outflow came in the panicky months preceding the two rounds of Greek elections in May and June.

More recently, the effort by Mr. Samaras’s government to push through spending cuts and economic overhauls has somewhat calmed fears of an immediate Greek euro exit. In fact there was actually a rare increase, of 2 percent, in Greek bank deposits in July.

The harder trick to turn could be persuading Greek real estate money in London to come back home — especially now, with the tax man closely watching.

UPDATE 1-Cyprus seeks gas supplies until 2018

Πηγή: Reuters
Sept 27 2012

The public natural gas company of Cyprus, Defa, said it had approved tender documents for the supply of natural gas to the island until September 2018, when its own reserves were expected to come on stream.

"The process will move very fast, with the objective of reaching a decision by the end of 2012," Defa said in a statement on Thursday.

Cyprus relies on heavy fuel oil to fire its power stations. It reported a significant natural gas find offshore in late 2011 of between 5 to 8 trillion cubic feet (tcf) of gas.

The cost of electricity has become almost prohibitively high since an accidental blast virtually levelled the largest generation facility at Vassilikos in July 2011, coupled with elevated prices of fuel.

Defa said the supply of gas from third parties was an interim solution, and said it was not an end in itself. It added that it would only proceed with the supply option if the prices would guarantee a significant reduction in the cost of generating electricity.

In its announcement, the company did not specify the amounts Cyprus may require, though past estimates have put the island's needs as up to 1 bcm per year.

No technology would be excluded, Defa said. "Interested parties can propose any means of supply and transport of natural gas; liquefied, compressed or other," it said.

Significant natural gas discoveries have been reported over the past three years in the eastern Mediterranean basin. Neighbouring Israel has reported two major finds offshore, and Lebanon on Monday reported up to 12 tcf of gas lie off its southern coast.

Surveys have suggested over 100 tcf of reserves could lie untapped throughout the region, a potential that has sparked investor interest but also revived decades-old border disputes.

Greece Evaluating Oil Exploration Bids, Papageorgiou Says

Πηγή: Bloomberg
By Paul Tugwell
Sept 27 2012

Greece is evaluating bids to explore and produce oil and gas reserves in three blocks in the west of the country, Deputy Energy Minister Assimakis Papageorgiou said.

“The bids were opened in the middle of this month and are in the process of final evaluation,” Papageorgiou said at a conference yesterday, according to an e-mailed transcript of his comments from the ministry.

Greece received eight bids from 11 companies acting on their own, or as part of ventures, for oil and natural-gas reserves in the Patraikos Gulf and in Katakolo, located off the western coast, and in Ioannina in the northwest of the mainland, the Athens-based Energy Ministry said on July 2.

A venture between Hellenic Petroleum SA (ELPE), Edison International (EIX) SpA and Melrose Resources Plc (MRS) made bids for Ioannina and Patraikos, a group comprising Energean Oil & Gas SA, Trajan Oil & Gas Ltd. and Schlumberger Ltd. (SLB) bid for rights in Patraikos and Katakolo, while Energean and Schlumberger together with Petra Petroleum Inc. (PTL) bid for Ioannina, the ministry said.

Arctic Hunter Energy Inc. (AHU) and K.O. Enterprises Inc. made a joint bid for Ioannina while Chariot Oil and Gas Ltd. submitted an offer on its own. Grekoil Energy Ventures Ltd. made a solo bid for Katakolo.

SPECIAL REPORT - Greece's other debt problem

Conservative New Democracy leader Antonis Samaras arrives at the Presidential Palace in Athens June 20, 2012.

Πηγή: Reuters

By George Georgiopoulos and Stephen Grey
Sept 27 2012

The two main political parties in Greece are facing their own financial crisis. New Democracy and Pasok, the key members of the country's coalition government, are close to being overwhelmed by debts of more than 200 million euros, say rivals, as the big parties head for a slump in state funding because of falling public support.

In Greece's state-financed political system, parties that receive more votes get more funding. Relying on past good results, the big political parties have pledged future state funding as collateral for bank loans. But in the most recent poll their support collapsed, leaving them with big loans and facing much smaller incomes.

Banking sources familiar with the issue say that conservative New Democracy and socialist Pasok now owe a combined 232 million euros to Greek banks. Some of the loans are going unpaid, those sources say. The debts far exceed the combined 37 million euros the parties received in state funding last year - a figure set to decline.

The parties' debts raise questions about potential conflicts of interest because the government is in hock to a financial system that it also needs to reform. Athens is already struggling to implement spending cuts and reforms demanded by the European Union, International Monetary Fund (IMF) and European Central Bank (ECB) in return for the 130 billion euro bailout keeping Greece afloat. On Wednesday unions called a nationwide strike protesting against austerity.

Leandros Rakintzis, Greece's independent inspector-general of public administration, believes the financial crunch the two big parties face is proof that Greece's political funding system is flawed. "This is all about the exchange of favours," he said. "These parties cannot pay the debt so it's a vicious circle in which they come to depend on the banks. It creates an interdependence of politicians and banks."

The loan pressures will intensify early next year when state funding is recalculated to reflect declines in the parties' support. At present, funding is still based on the proportion of votes each party won in the June 2009 election. But in January funding will change to reflect votes cast in June 2012.

At that election Pasok saw its share of the vote plunge from 43 percent to 12 percent, while New Democracy's share fell from 33 percent to 29 percent. The big winner was leftist Syriza, which opposed the bailout terms. Its share of the vote shot up to 27 percent from 4.6 percent in 2009, and it now stands to receive significantly more funding.

Costas Tsimaras, the general manager of New Democracy, the biggest party in the Greek parliament, told Reuters the bulk of its bank loans were currently being paid on time, but "a small proportion of the loans may have become late, non-performing."

For the parties to keep on top of the loans, he said, they should be restructured.

"It will be very difficult for the parties to pay back the debt if there is no arrangement. Down the road, a political decision needs to be made to give parties the capacity to service their liabilities, some type of settlement on these loans."

Pasok did not respond to requests for comment.

Greece's other debt problem (pdf) link.reuters.com/ryq82t

STATE HANDOUTS

Like many European countries, Greece provides some public funding for political parties and their election campaigns: last year the state handed out a total of 54 million euros.

Each year parties receive tax-free funding equal to 0.102 percent of annual state revenue, plus another 0.01 percent for "research and education" purposes. When national or European parliamentary elections take place an extra 0.022 percent of annual state revenue is handed out.

Private companies, owners of media and foreign nationals are banned from funding parties. Individuals giving more than 600 euros have to be identified and are allowed to give only up to 15,000 euros a year, though it is unclear how well these rules are enforced.

The lion's share of the state funding pie, 80 percent, is divided between parties that win seats in parliament, each one receiving amounts proportional to the votes they score. That funding does not include the cost of MPs salaries and other parliamentary expenses, which are paid separately.

Greece is among the most generous of EU countries to political parties. It provided an average of 6.5 euros per registered voter per year between 2007 and 2011 - the fourth highest funding in the EU after Luxembourg, Cyprus and Finland, according to Forologoumenos, a Greek taxpayer association that tracks state spending on politics.

By another measure, Greece hands out three times the amount spent by Germany on political parties. Per valid vote cast, Athens spends an average 9.4 euros versus Germany's 3.1 euros, says Forologoumenos.

In 2011 New Democracy, led by Antonis Samaras, received 16.9 million euros and Pasok, now led by Evangelos Venizelos, 21.7 million. That state funding accounted for about 75 percent of New Democracy's income, the party said, though the proportion fluctuates from year to year. Pasok did not comment on how much it depends on public funds.

In 2010, when Greece's debt crisis exploded and forced Athens to seek a bailout, the country spent a total of 65 million euros on funding parties in a country of 11 million people. Germany, with a population more than seven times larger, limits state funding of political parties to 150 million euros.

For German lawmaker Klaus-Peter Willsch, the generous state funding in Greece is emblematic of the country's financial malaise. "This self-serving mentality will not come to an end as long as Greece is funded by the solvent states in the euro zone," he said. "The fact that Greek parties get three times as much funding per vote as in Germany is part of the problem."

Willsch, a member of Angela Merkel's Christian Democrats who sits on the Bundestag's powerful budget committee, voted against the Greek bailouts.

MIND THE GAP

Even with state funding, Greek parties have had to borrow to fill the shortfall between their revenue and expenditure.

The main lender has been state-owned ATE Bank. By this year New Democracy owed ATE 105 million euros and Pasok owed ATE 96 million, according to banking sources. A senior source in the Greek parliament confirmed these amounts to Reuters.

Separately, Piraeus Bank, the country's fourth largest, lent New Democracy 15 million euros and Pasok 6.5 million euros. Three other banks made small loans to the parties. A banker familiar with the matter told Reuters that some of the loans "are non-performing, they are past due more than 90 days".

Piraeus denies any problem. "Piraeus Bank's loans to political parties are a small percentage of the total. They were given against guarantees of state funding. The loans are performing," said a Piraeus spokesman.

In late July, ATE had to be rescued from collapse, with parts of the bank, including the political loans, being taken over by rival Piraeus Bank. At the time the political loans were performing, said a source at ATE and a senior government official.

Piraeus has filed a lawsuit against Reuters, claiming 50 million euros in damages after Reuters published a report about a series of property deals between the bank and companies run by the family of its chairman. Reuters stands by the accuracy of its reports.

A banker with knowledge of the political loans said limits should be set "on the percentage of state funding that can be accepted as collateral and for how many years in the future. Otherwise, one would have to be a Houdini to know for sure what amount of state funds a party will be entitled to far out in the future, 10 years down the road."

For the parties, some pressures are already evident. One former staff member of Pasok, who asked not to be named, said that payments to party workers had been irregular since September last year.

New Democracy said its staff were paid on time. "We do not owe a single euro to anyone on the payroll," said general manager Tsimaras. However, he added: "Our bills to suppliers do face some delays."

A Pasok staff member said party funding had sometimes been spent poorly. In 2009, for instance, the party built a fully-equipped gym at its new headquarters and employed a personal trainer. "It is now a smaller party and costs have to be reined in," said the party staffer.

Pasok did not respond to requests for comment.

RISING ANGER

Greece is now in its fifth year of recession and is struggling to meet fiscal targets set by its euro zone partners and the IMF. The gap between government spending and revenues is projected at 7.3 percent this year, based on IMF estimates. The country's accumulated debt stands at 332 billion euros, equal to 163 percent of GDP.

Greek Prime Minister Antonis Samaras asked in August to be given a "breathing space" by the EU and IMF, which are pressing for more public spending cuts. At the same time, critics say the political system itself should tighten its belt.

"State funding to political parties must be adjusted to what the Greek economy can afford and not be far off from the corresponding average in the European Union," said Yannis Sarris, the general manager of small party Dimiourgia Xana, which calls itself the 'common sense' party.

Others say it is politically unacceptable for parties to be propped up with bank loans when many businesses are unable to obtain credit even against sound collateral. The small Democratic Alliance party (which folded into New Democracy at the June election) has previously called for a 50 percent cut in state funding to parties.

"On the one hand we have a country on the brink of bankruptcy, a suffering society, victim of an unprecedented tax onslaught," Democratic Alliance deputy Christos Markoyannakis told parliament in December last year. "On the other, we face the absolute provocation by those bearing the biggest share of responsibility for the country's crisis. As long as the cash flows into party coffers, all is fine and dandy."

The Group of States against Corruption (GRECO), a body set up by the Council of Europe, has also levelled serious criticisms at the way Greece funds its politics.

It has urged Athens to improve transparency of party funding, to strengthen controls over small donations for fear that rich donors could abuse the system, and to ensure that loans are repaid under their original terms - otherwise they risk becoming de facto donations.

The group concluded: "There is in Greece a general public mistrust of the system of political financing and supervision, which may be attributed to an overall inefficient and opaque system of supervision, in which political parties are both judge and jury.

"This system has failed, under current law, to uncover and sanction any - even minor - infringement of the rules on political financing."

So far, none of GRECO's 16 recommendations have been implemented, the organisation says.

The omens for reform are not encouraging. Last year Nikos Alivizatos, a constitutional lawyer, helped draft a new law to correct shortcomings of the current system, including barring banks from lending to political parties. The legislation was shelved because the two main parties were keen to maintain the status quo, say political observers.

Exclusive: IMF, EU clash over Greece's bailout prospects

Πηγή: Reuters
By Dina Kyriakidou and Lesley Wroughton
Sept 26 2012

Greece's international official lenders are at loggerheads over how to solve Athens' debt crisis, threatening more trouble for the euro.
Officials from Greece and the "troika" of European Union, European Central Bank and International Monetary Fund have told Reuters tensions have risen in recent weeks as negotiators wrangle over further budget cuts, with the IMF adamant that Greece reduce its debt further.

European officials say the IMF is also pushing them to restructure debts Athens owes them, an uncomfortable prospect for some of Europe's leaders who find the idea of their governments taking losses on the debt politically unpalatable.

"The problem is not between the IMF and Athens, it's between the IMF and the EU," one Greek official said, speaking on condition of anonymity. That view was confirmed by sources familiar with the thinking in Brussels and Washington.

Already facing an electoral backlash over bailouts and austerity budgets, and unsure what may be needed to defend the creaking public finances of heavyweight countries like Spain and Italy, EU leaders do not relish the idea of swallowing tens of billions of euros of losses on their official holdings of Greek government bonds.

To ease Greece's debt burden they fear the IMF will demand they write off some of the Greek debt they hold, although simply cutting the interest rates they charge could also help Athens.

"Europe wants more time to see what will happen with Spain and Italy, perhaps even after the German election in 2013," the Greek official said. "The IMF wants Europe to come up with a comprehensive solution to its problems now."

While EU leaders want to give Greece more time to meet its bailout goals, pushing back the goal post would require more aid for Greece, which has already received a 130 billion euro EU/IMF bailout, to tide Athens over.

The Fund, brought in for its expertise and reputation for imposing fiscal discipline, is keen to protect the hard-earned credibility it put on the line by contributing to the bailout package which set Greece a target of cutting its debt to under 120 percent of GDP by 2020.

The Fund, whose biggest shareholders are the United States and Japan, believes there is no way to avoid providing more money for Greece. A restructuring of Greek debt held by EU countries and institutions is among the options - although no formal proposal has yet been made.

IMF Managing Director Christine Lagarde broached the issue in a speech in Washington this week when she said Greek debt will have to be addressed.

"At the end of the game there needs to be debt restructuring. There is just no other way to make this work," said Jacob Kirkegaard, research fellow at the Peterson Institute for International Economics in Washington

FUND'S PATIENCE TESTED

German Finance Minister Wolfgang Schaeuble, whose own creditor government has been concerned at slippage in Greece's efforts to cut spending and raise taxes, gave a rare public hint of IMF concerns last week: "You should ask around about what the mood is like in the IMF," he told reporters in Berlin, "in having to deal constantly with these European problems and the repeated failure of the Europeans to meet agreed targets."

A restructuring - essentially requiring the ECB and European governments to take losses on nearly 200 billion euros in Greek debt they hold - could ease Greece's burden.

Private investors holding Greek debt took such a "haircut" this year, but with economic reforms being held up and a recession much deeper than expected, Greece seems likely to have to suffer more pain itself, or inflict more on its creditors, if it is to put its finances on a sustainable footing and resume market borrowing.

Out of Greece's 204 billion-euro official debt, 20 billion is owed to the IMF, which would be repaid in full in the event of an official-sector restructuring. The ECB has so far refused to face any losses on the bonds it has purchased over past years to prop up Greece's economy, estimated at about 50 billion euros.

With the Greek public pushing its government to resist more austerity, Finance Minister Yannis Stournaras's frustration at demands from lenders for deeper spending cuts prompted him to threaten resignation at one point last week, sources in Athens have said.

"It is now clear to the IMF that Greece will need more time or more money or both," a Troika official told Reuters.

Greece has asked for an extra two years to meet interim targets and European leaders appear to agree. Stournaras, the finance minister, told Reuters on Tuesday that such an extension would cost an additional 13-15 billion euros, which could be covered without further pain for European taxpayers.

Such a gap could be covered through the issuance of more short-term debt, by seeking lower interest rates from the ongoing bailout loans or a rollover of debt held by the ECB.

France has backed the two-year pause while a euro zone official said Germany is not opposed, provided Athens shows results soon.

TENSIONS HIGH

Participants said tension was high during a meeting between officials from Greece and the troika last week to work out an additional 11.5 billion euros worth of savings measures. At one point Stournaras threatened to quit if Poul Thomsen, the Dane who runs the IMF's relations with Greece, pressed for more cuts.

"Nothing pleases Thomsen anymore," another Greek official said. "Last time the troika was here we agreed 5 to 5.5 billion euros would come from salary and pension cuts. Now we have come up with 7.5 to 8 billion, and they are not enough."

If Greece deviates substantially from the terms of the rescue package, the Fund could face questions from other members about slipping controls or double standards for borrowers. Analysts said it might even consider pulling out of the Greek commitment, although such a move is unlikely.

"In theory, the IMF could withdraw from the deal if it is not satisfied the bailout fulfilled the ... criteria," said Ben May of Capital Economics. "In practice, it isn't so black and white and there is obviously potential for some kind of fudge."

Disputes within the rescue mission, however, also reflect deeper concerns about Greece's ability to cut its debt-to-GDP ratio from a current level around 160 percent and to recover the confidence of private investors willing to buy its bonds.

Plans by Greece to raise revenues by selling off state assets now look less likely with global investors unwilling to invest in Greece at a time that its future in the euro zone is still in question.

"There is potentially quite a big standoff," said May of Capital Economics. "I don't see the bailout lasting to the end of its duration and it could break down at any time.

"Lots of ... bankers in the chorus seem to indicate they would be quite happy for Greece to leave the euro."

Northern Cyprus to outline new gas exploration plan-Eroglu

Πηγή: Reuters
By Daniel Bases
Sept 26 2012

Turkish Cypriot leader Dervis Eroglu said on Tuesday he would present a new plan to the U.N. secretary-general for gas explorations surrounding the divided island, resources that could change its economic landscape.

"I am planning to present a plan to the secretary-general, a proposal, a new one on the gas exploration and exploitation of hydrocarbon reserves," Eroglu said through a translator of his scheduled Saturday meeting with Ban Ki-moon.

Eroglu, speaking in the unrecognized nation's offices housed within Turkey's mission to the United Nations, would not provide details when pressed about his ideas.

Northern Cyprus signed an agreement with state-run Turkish Petroleum Corporation, or TPAO, in April to launch onshore exploratory drilling.

In the next five or six months, TPAO is expected to start drilling offshore to see if it can find gas deep in the eastern Mediterranean, said Eroglu, who was in New York for the United National General Assembly meeting.

The island has been divided since 1974, when the Turkish military invaded after a short-lived Greek Cypriot coup engineered by the military junta then in power in Athens.

Turkey was outraged last year when the internationally recognized government of Cyprus, led by Demetris Christofias, licensed Texas-based Noble Energy to explore an offshore block for natural gas in what it said was one of the biggest finds in years.

If the gas discovered by Greek Cypriots is proven reliable, it could end their dependency on energy imports and make them self-sufficient for decades.

"I have already warned Mr. Christofias at the table that if you start your drilling activities, then we will engage in our own drilling activities in the waters around Cyprus," Eroglu said.

After the announcement between the Greek Cypriots, a member of the European Union, and Noble Energy, Ankara dispatched naval ships to accompany its own seismic research vessel to explore in waters 10 kilometers (6.2 miles) from the Cyprus drill site.

Cyprus holds the rotating presidency of the EU through the end of the year.

Hydrocarbons could provide financial relief to both sides of the divided island.

ISOLATED NORTH

Greek Cypriots were forced to seek aid from the International Monetary Fund and the EU in June to prop up their banks, which were badly exposed to debt-crippled Greece.

Turkish Cypriots living north of a buffer zone are economically and political isolated, relying on financial handouts from Ankara.

Turkey still keeps about 30,000 troops in the north and is the only nation that recognizes the self-declared Turkish Republic of Northern Cyprus.

Greek and Turkish Cypriots agree in principle on reuniting the island as a federation but differ on how it would work. Their lack of progress forced the U.N.'s Ban to scrap plans in April for an international conference on Cyprus.

Eroglu's intention to bring a gas exploration plan to Ban is aimed at reviving negotiations.

Eroglu said he proposed using whatever is earned from any gas or oil to finance a reunification settlement.

"That under the secretary-general's direction there should be an escrow fund for collecting this revenue so that it could be used for financing the settlement," Eroglu said.

Direct talks between the leaders of the Greek and Turkish Cypriots have been on hold for several months, partly because of a Greek Cypriot poll in 2013 to elect a new president and their EU presidency.

Christofias, who is the EU's only communist head of state, said in May he would not seek re-election citing the lack of progress toward reunification.

The head of the opposition Democratic Rally Party, Nicos Anastassiades, is a prime contender to win the election. Eroglu has said he could work with Anastassiades in the two years before his own term ends in April 2015.

"It is not easy to tell if there will be an agreement or not," Eroglu said. "If we were to judge him on the basis of the statements that he is making today, it appears that he wants to take back even the concessions, he says, made by Mr. Christofias.

"But we have to take this as campaign rhetoric at the moment."

Total warns against oil drilling in Arctic

Πηγή: FT
By Guy Chazan
Sept 25 2012

Total SA says energy companies should not drill for crude in Arctic waters, marking the first time an oil major has publicly spoken out against offshore oil exploration in the region.

Christophe de Margerie, Total’s chief executive, told the Financial Times the risk of an oil spill in such an environmentally sensitive area was simply too high. “Oil on Greenland would be a disaster,” he said in an interview. “A leak would do too much damage to the image of the company”.

Last week, Royal Dutch Shell had to postpone until next year an attempt to drill into oil-bearing rock off the Alaskan coast after a piece of safety equipment was damaged during testing. It has spent $4.5bn and seven years preparing to drill.

ExxonMobil, ENI of Italy and Norway’s Statoil have also signed deals to explore for oil in Russia’s Arctic waters, while others have secured licences to drill off Greenland.

Mr de Margerie emphasised that he was not opposed to Arctic exploration in principle. Total has a number of natural gas ventures in the region, including a stake in the vast Shtokman field in Russia’s Barents Sea. The Total chief executive said gas leaks were easier to deal with than oil spills.

His comments were welcomed by environmental groups that are opposed to Big Oil’s presence in what they see as a near-pristine wilderness.

“The rest of the oil industry should heed his warning,” said Ben Ayliffe, head of Greenpeace’s Arctic campaign. “Given the risks, companies shouldn’t be touching the Arctic with a barge pole.”

Shell declined to comment. It has said in the past that it is well prepared for spills, with round-the-clock response teams on Alaska’s North Slope and a fleet of specialised vessels that will be in place before drilling starts.

According to a 2008 study by the US Geological Survey, the Arctic contains just over a fifth of the world’s undiscovered, recoverable oil and gas resources. The melting of the polar ice cap has made the area more accessible to the majors than ever before.

The region’s challenges are formidable, however, ranging from icebergs the size of cities to storms, darkness and fierce cold. There is also no certainty of success: UK-listed explorer Cairn Energy spent $1bn exploring off Greenland and failed to find commercial volumes of oil.

Total’s Arctic projects are concentrated in Russia. As well as its stake in Shtokman, it has interests in a number of onshore developments, such as a big liquefied natural gas venture in Russia’s far north known as Yamal LNG. It also operates a Siberian oilfield called Kharyaga.

Gazprom announced in August that it was shelving Shtokman due to excessive costs. But Mr de Margerie said as far as he was concerned, it was still on. “Gazprom never told me in writing that the project is over,” he said. “Discussions are not ... as active as I would like. [But] the reserves are still there.”

Death of Libyan rebel raises calls for vengeance

In this undated handout photo released by the family of Omran Shaaban, Shaaban receives treatment from a doctor at a hospital in France. 

Πηγή: AP

By AYA BATRAWY
Sept 26 2012

MISRATA, Libya — One of the young Libyan rebels credited with capturing Moammar Gadhafi in a drainage ditch nearly a year ago died Tuesday of injuries after being kidnapped, beaten and slashed by the late dictator's supporters — the latest victim of persistent violence and instability in the North African country.

The death of Omran Shaaban, who had been hospitalized in France, raised the prospect of even more violence and score-settling, with the newly elected National Congress authorizing police and the army to use force if necessary to apprehend those who abducted the 22-year-old and three companions in July near the town of Bani Walid.

Libya is battling lingering pockets of support for the old regime, and its government has been unable to rein in armed militias in a country rife with weapons. Earlier this month, a demonstration at the U.S. Consulate in the eastern city of Benghazi turned violent, killing four Americans, including the U.S. ambassador.

Shaaban was praised as a "dutiful martyr" by the National Congress, although his family says he never received a promised reward of 1 million Libyan dinars ($800,000) for capturing Gadhafi on Oct. 20, 2011, in the former leader's hometown of Sirte. The eccentric dictator was killed later that day by revolutionary fighters.

The Libyan government said it would honor Shaaban with a funeral befitting a hero. His body was greeted at the airport in his hometown of Misrata by more than 10,000 people for a procession to a soccer stadium for funeral prayers.

Photos on social media websites showed a wooden coffin with a glass window that revealed Shaaban's face, with white gauze covering his head.

In the capital of Tripoli, several hundred protesters gathered outside the headquarters of the National Congress to demand that the government avenge Shaaban's death.

Shaaban's family said that he and three friends had been en route home to the western city of Misrata from a vacation in July when they were attacked by gunmen in an area called el-Shimekh near Bani Walid.

Shaaban and his friends, who like many Libyans were armed, fired back, the family said.

Two bullets hit Shaaban, and he was paralyzed from the waist down, his relatives said. The men were captured by militiamen from Bani Walid, a town of about 100,000 people that remains a stronghold of Gadhafi loyalists and is isolated from the rest of Libya.

President Mohammed el-Megarif visited Bani Walid this month and secured the release of Shaaban and two of his companions. A fourth is still being held.

When Shaaban was finally brought home, he was "skin and bones" — still paralyzed, frail and slipping in and out of consciousness, according to his brother, Abdullah Shaaban.

"It was clear he was beaten a lot," Abdullah Shaaban said. "His entire chest was sliced with razors. His face had changed. It wasn't my brother that I knew."

Omran Shaaban later was flown to France for medical treatment.

Shaaban, the second youngest in a family of nine children, was a member of Libya Shield, a loose coalition of the country's largest militias relied on by the Defense Ministry.

Khalifa al-Zawawi, the former head of Misrata's local council, said the government reneged on paying the reward to Shaaban.

Abdullah Shaaban said his brother did not mind, saying he considered capturing Gadhafi to be his national duty.

Libya's president released a statement Tuesday vowing that those responsible for the violence against Omran Shaaban would be punished.

But apprehending and disarming the militants in Bani Walid are among the most daunting tasks facing the government. The town is heavily armed with rocket-propelled grenades, automatic weapons and artillery left over from last year's civil war.

Residents of Bani Walid say that pictures of Gadhafi are displayed during weddings and youths play his speeches on their cars' stereos. Students refrain from singing Libya's new national anthem and teachers refuse to follow the revised curriculum.

Bani Walid fighters were blamed for many of the sniper attacks, shelling, rapes and other violence against the city of Misrata during the civil war, and there were new calls Tuesday from residents of Misrata for vengeance against Bani Walid.

Shaaban's eldest brother, Walid, insists there will be justice for the family, regardless of whether the government is the one to administer it.

"I plan to pursue his rights legally and join if there is a military incursion. We are going to death, God willing," Walid Shaaban said.

Family friend Abu-Shaala echoed that sentiment.

"If the government does not go in, we are going in," he said. "We are all patient. But our patience has limits."

Greece's disappearing middle class (CNN vid)

Πηγή: CNN
Sept 25 2012

Greece shows dangers of cuts in health during crisis

European Health Forum Gastein

Πηγή: Austrian Times
Sept 25 2012

In times of economic crisis health service budgets are often slashed dramatically at exactly the time that money worries are meaning more people are ending up sick.

This scenerio has been proven time and again - most recently in Greece where the state health service has seen staff numbers plunge and the money for equipment, medicines and clinics falling at a time when patient numbers have increased dramatically.

In cash-strapped Greece that meant hospital admissions were up 25 percent - but at the same time hospital budgets have been cut by 40 percent leaving shortages of medicine and staff.

The department of health reports that suicides are up 40 percent as well - with budgets for mental health care and drug dependents axed.

Doctors of the World, a charity that runs health clinics, said Greece in 2012 had all the characteristics seen in big cities in the Third World, people with no shelter, starving people and people looking for doctors and medicine.

And according to experts meeting next month at the 15th European Health Forum (EHFG) in Gastein - Greece may not be alone for long.

After decades of rising prosperity, the spectre over Europe is of a continuing financial crisis which will mean austerity in public health spending.

With health care representing 10% of GDP in the EU, and providing one of the largest sources of employment, it is a problem that needs tackling now say the event organisers.

EHFG's founder-president Dr Guenther Leiner said the financial crisis was very real - but also presented opportunities.

He said: "We have held, at the EHFG, fruitful debates on how limited resources could be used more sensibly and effectively." But he said talk alone was not enough and added: "It is high time that these be implemented on a political level."

The EHFG will bring together some 600 participants including some of the most influential figures in 50 countries in Europe, as well as Russia, Taiwan, and the SEE countries. Those taking part include Austrian health minister Alois Stöger, EU Commissioner for Health and Consumer Policy John Dalli and the Regional Director for the WHO Europe Zsuzsanna Jakab.

Debates will focus on the health consequences of political responses to the financial crisis, and how - despite this - sustained improvements in both health and economic growth might be achieved.

Other areas to be discussed are the prospects for public health in 2050, sustainable health systems, personalised medicine, non-communicable diseases, health communication, and global governance.

Workshops will examine in detail such issues as vaccination and innovative approaches to improve trust and uptake, and the often disruptive role of social media; aligning the pharmaceutical industry with social needs; improving nutrition in Europe with flour fortification; health reform in practice; solutions to chronic disease; or the epidemic of kidney disease.

EHFG President Dr Leiner added: "The great virtue of the EHFG, and what has made its international reputation over these 15 years, is that we address real issues, and look for practical solutions."

The congress Crisis and Opportunity - Health in an Age of Austerity takes place at Bad Hofgastein in Salzburg from October 3 to 6, 2012.

Greece is falling further and further into a debt-filled abyss

Πηγή: Mindful Money
By Shaun Richards
Sept 25 2012

One of the main issues that keeps coming up again and again in the economic crisis that is afflicting Greece is the way that official forecasts and estimates keep being wrong,often very wrong. If you are polite you would call these forecasts rose-tinted if you are less so you might consider it another version of kicking the can into the future. Actually they have been tantamount to lies and in the way that they have put Greece on the wrong course with false hope they have been very dangerous lies. It must be very demoralising for the Greeks to find that again and again they have to do more because reality keeps being ignored and replaced by wishful thinking.

The International Monetary Fund

If we go back only to March this year we saw an example of this from the IMF as it produced this on the 9th of March after Greece’s debt restructuring or private-sector involvement.

A key ingredient in the government’s revamped economic strategy was the successful conclusion on March 9 of a substantial write-down of Greece’s bonded debt, which will dramatically reduce the country’s medium-term financing needs. The IMF has maintained that Greece must reduce its debt-to-GDP ratio to 120 percent by 2020 if its debt is to become sustainable in the medium term. The debt exchange, which saw private sector investors agreeing to write down 75 percent of their Greek bond holdings, is the largest and steepest debt reduction agreement in history.

The problem was that the 120% of GDP target for Greece’s National Debt was never very likely as a result of that move alone. A large factor in this was the fact that a substantial investor in Greek debt the European Central Bank excluded itself from the process. A so called rescue vehicle -purchases of Greek government debt under the Securities Markets Programme to support their price and reduce yields- actually became a punishment for Greece as otherwise the bonds would have been subject to a restructuring.

To get anywhere near the 120% of GDP level for Greek national debt in 2020 both the present and the future needed to be manipulated as I discussed back on the 21st of February.

To get anywhere near the target established above the Euro zone had the problem that somehow it needed to “improve” the numbers. It started mildly by assuming an economic contraction of 4.3% this year and a flat outcome in 2013 although already it is probably too mild. The current figures point to a worse outcome for 2012 and if there is any evidence for a turn-around in 2013 I hope they will present it. But then we see the dark-side of such analysis as look at Greece go!

Just to make it even worse all this manipulation of the future was to achieve a national debt to GDP ratio that does not actually mean anything. Research on the subject has suggested that ratios of 90% and 100% may have significance as barriers. The only possible reason for using 120% was that otherwise you gave Italy a problem.

At the time I criticised such analysis as being like the Mad Hatters Tea Party. As time goes by I am starting to think that I may have been somewhat unfair on the Mad Hatter.

Reality has begun to unfold in the meantime

The Greek economy is already behind on the absurdly optimistic growth forecasts shown above and as I discussed on August 8th Standard and Poor’s gave a very different view.

We project GDP will contract by 10%-11% cumulatively during 2012-2013, versus the negative 4%-5% assumed by the EU/IMF Program for 2012-2013.

This much more realistic view had a sting like a Scorpion’s Tail attached to it.

the related worsening of the fiscal position imply a high likelihood that Greece will require additional financing of as much as €7 billion (3.7% of GDP) for 2012

At that time I suggested that Greece would need bailout mark 3.0.

What is the significance of this now?

Last night Christine Lagarde who is the managing director of the IMF gave us a clear hint of problems with the Greek programme.

The last thing we want is for programs to be off track and off track and off track again

If we review the economic forecasts for Greece that were signed off by Mademoiselle Lagarde we can see that the fact that the programme is off track again is because it was full of fantasies. Indeed she continued one of the fantasies as she repeated the importance of the Greek national debt coming down to 120% of GDP.

Whilst there have been genuine problems with the Greek implementation of her austerity programme it is not even remotely fair to blame her for forecasts which were of the garbage in garbage out variety. Unfortunately Christine Lagarde has a long record of failure which is simply getting longer.

What is happening in Greece now?

Back on August 8th I discussed the claims of Greek politicians that they were near to a resolution of the issue of another 11.5 billion Euros of cuts. Well it would appear that they are still near to it! Frustration with this lack of progress must be a major reason why the inspectors of the troika (ECB,IMF,EC) have left Greece for a week.

It looks as though the Greek Prime Minister is planning to give a national address on television to try to rally support for the austerity plan. This comes at an unfortunate time as Portugal’s Prime Minister has only just been forced to reverse measures announced in a televised addressing of his nation. Tomorrow’s General Strike in Greece will only increase the difficulties she faces. I doubt that their mood will be improved much by passing this sort of evidence of Greece’s economic collapse. From Kathimerini

In the city’s «commercial triangle», where generations of merchants had run successful businesses a stone’s throw from the central Syntagma Square, an August census by retail lobby group ESEE found 31 percent of shops had closed.

Even if this is achieved issues remain

As ever the troika process is leaking details and they have been making a steady progression in terms of extra austerity required by Greece from 10 to 20 and now apparently 30 billion Euros if she is to achieve the targets under her second bailout programme. The reason for this will come as no surprise which is mostly that Greece’s economy has underperformed the fantasies that the troika made on its behalf. No wonder she is suffering from bailout fatigue!

One issue that never seems to go away is the fact that the Greek government has continued to use not paying its bills as a way of keeping expenditure under control. Her finance minister admitted to unpaid bills of 6.5 billion Euros only last week. Such numbers make one wonder how what is reported below by her Ministry of Finance has actually been achieved.

State Budget expenditures up to August 2012 were reduced compared to same period a year ago by 5,657 million Euros or 11.0%. It is noted that most individual spending categories were reduced with the greatest saving achieved in Primary Expenditure which presented a 9.3% decrease (or 3,170 million Euro), a figure constituting the main indicator of State Budget expenditure restriction.

Greece’s Balance of Payments

Greece’s statistics office has released her latest trade figures for today and they show a worrying sign. The improvement in her exports seems to have stopped as July 2012 showed a 1.3% fall on July 2011 in value terms. As there is positive inflation this is a larger fall in real terms. Monthly figures can be very erratic so care is needed but it looks as though Greece’e export boom is slowing as for 2012 so far her exports had increased by 6.1%. As one thing that IMF style programmes can usually achieve is balance of trade improvements this is very worrying if it should continue.

Also there is food for thought for one of the supposed benefits of being in the Euro as Greece’s trade performance improvement in 2012 so far is much more marked with nations with whom she does not share a common currency!

Comment

As if on cue Greece’s deputy finance minister has announced this morning that she may ask the European Central Bank to keep rolling over its holdings of Greek government debt. Why? Because she does not have the money to repay them. The catch of course is that this is a back-door method of financing Greece and does anybody recall the supposed three-year term of the original 2010 bailout?

So we see Greece being saddled with ever more debt which is a complete contradiction of the modus operandi of the debt restructuring. This is the consequence of the austerity,economic decline, more austerity, more economic decline cycle in which her leaders have trapped her and to which there is no apparent end. The bailout of Greece just like Quantiative Easing is seemingly taking advice from Buzz Lightyear.

Too Infinity…..And Beyond!

Understanding the China-Japan Island Conflict

Πηγή: Stratfor
By Rodger Baker
Sept 25 2012

Sept. 29 will mark 40 years of normalized diplomatic relations between China and Japan, two countries that spent much of the 20th century in mutual enmity if not at outright war. The anniversary comes at a low point in Sino-Japanese relations amid a dispute over an island chain in the East China Sea known as the Senkaku Islands in Japan and Diaoyu Islands in China.

These islands, which are little more than uninhabited rocks, are not particularly valuable on their own. However, nationalist factions in both countries have used them to enflame old animosities; in China, the government has even helped organize the protests over Japan's plan to purchase and nationalize the islands from their private owner. But China's increased assertiveness is not limited only to this issue. Beijing has undertaken a high-profile expansion and improvement of its navy as a way to help safeguard its maritime interests, which Japan -- an island nation necessarily dependent on access to sea-lanes -- naturally views as a threat. Driven by its economic and political needs, China's expanded military activity may awaken Japan from the pacifist slumber that has characterized it since the end of World War II.

An Old Conflict's New Prominence

The current tensions surrounding the disputed islands began in April. During a visit to the United States, Tokyo Gov. Shintaro Ishihara, a hard-line nationalist known for his 1989 book The Japan That Can Say No, which advocated for a stronger international role for Japan not tied to U.S. interests or influence, said that the Tokyo municipal government was planning to buy three of the five Senkaku/Diaoyu islands from their private Japanese owner. Ishihara's comments did little to stir up tensions at the time, but subsequent efforts to raise funds and press forward with the plan drew the attention and ultimately the involvement of the Japanese central government. The efforts also gave China a way to distract from its military and political standoff with the Philippines over control of parts of the Spratly Islands in the South China Sea.

For decades, Tokyo and Beijing generally abided by a tacit agreement to keep the islands dispute quiet. Japan agreed not to carry out any new construction or let anyone land on the islands; China agreed to delay assertion of any claim to the islands and not let the dispute interfere with trade and political relations. Although flare-ups occurred, usually triggered by some altercation between the Japanese coast guard and Chinese fishing vessels or by nationalist Japanese or Chinese activists trying to land on the islands, the lingering territorial dispute played only a minor role in bilateral relations.

However, Ishihara's plans for the Tokyo municipal government to take over the islands and eventually build security outposts there forced the Japanese government's hand. Facing domestic political pressure to secure Japan's claim to the islands, the government determined that the "nationalization" of the islands was the least contentious option. By keeping control over construction and landings, the central government would be able to keep up its side of the tacit agreement with China on managing the islands.

China saw Japan's proposed nationalization as an opportunity to exploit. Even as Japan was debating what action to take, China began stirring up anti-Japanese sentiment and Beijing tacitly backed the move by a group of Hong Kong activists in August to sail to and land on the disputed islands. At the same time, Beijing prevented a Chinese-based fishing vessel from attempting the same thing, using Hong Kong's semi-autonomous status as a way to distance itself from the action and retain greater flexibility in dealing with Japan.

As expected, the Japanese coast guard arrested the Hong Kong activists and impounded their ship, but Tokyo also swiftly released them to avoid escalating tensions. Less than a month later, after Japan's final decision to purchase the islands from their private Japanese owner, anti-Japanese protests swept China, in many places devolving into riots and vandalism targeting Japanese products and companies. Although many of these protests were stage-managed by the government, the Chinese began to clamp down when some demonstrations got out of control. While still exploiting the anti-Japanese rhetoric, Chinese state-run media outlets have highlighted local governments' efforts to identify and punish protesters who turned violent and warn that nationalist pride is no excuse for destructive behavior.

Presently, both China and Japan are working to keep the dispute within manageable parameters after a month of heightened tensions. China has shifted to disrupting trade with Japan on a local level, with some Japanese products reportedly taking much longer to clear customs, while Japan has dispatched a deputy foreign minister for discussions with Beijing. Chinese maritime surveillance ships continue to make incursions into the area around the disputed islands, and there are reports of hundreds or even thousands of Chinese fishing vessels in the East China Sea gathered near the waters around the islands, but both Japan and China appear to be controlling their actions. Neither side can publicly give in on its territorial stance, and both are looking for ways to gain politically without allowing the situation to degrade further.

Political Dilemmas in Beijing and Tokyo

The islands dispute is occurring as China and Japan, the world's second- and third-largest economies, are both experiencing political crises at home and facing uncertain economic paths forward. But the dispute also reflects the very different positions of the two countries in their developmental history and in East Asia's balance of power.

China, the emerging power in Asia, has seen decades of rapid economic growth but is now confronted with a systemic crisis, one already experienced by Japan in the early 1990s and by South Korea and the other Asian tigers later in the decade. China is reaching the limits of the debt-financed, export-driven economic model and must now deal with the economic and social consequences of this change. That this comes amid a once-in-a-decade leadership transition only exacerbates China's political unease as it debates options for transitioning to a more sustainable economic model. But while China's economic expansion may have plateaued, its military development is still growing.

The Chinese military is becoming a more modern fighting force, more active in influencing Chinese foreign policy and more assertive of its role regionally. The People's Liberation Army Navy on Sept. 23 accepted the delivery of China's first aircraft carrier, and the ship serves as a symbol of the country's military expansion. While Beijing views the carrier as a tool to assert Chinese interests regionally (and perhaps around the globe over the longer term) in the same manner that the United States uses its carrier fleet, for now China has only one, and the country is new to carrier fleet and aviation operations. Having a single carrier offers perhaps more limitations than opportunities for its use, all while raising the concerns and inviting reaction from neighboring states.

Japan, by contrast, has seen two decades of economic malaise characterized by a general stagnation in growth, though not necessarily a devolution of overall economic power. Still, it took those two decades for the Chinese economy, growing at double-digit rates, to even catch the Japanese economy. Despite the malaise, there is plenty of latent strength in the Japanese economy. Japan's main problem is its lack of economic dynamism, a concern that is beginning to be reflected in Japanese politics, where new forces are rising to challenge the political status quo. The long-dominant Liberal Democratic Party lost power to the opposition Democratic Party of Japan in 2009, and both mainstream parties are facing new challenges from independents, non-traditional candidates and the emerging regionalist parties, which espouse nationalism and call for a more aggressive foreign policy.

Even before the rise of the regionalist parties, Japan had begun moving slowly but inexorably from its post-World War II military constraints. With China's growing military strength, North Korea's nuclear weapons program and even South Korean military expansion, Japan has cautiously watched as the potential threats to its maritime interests have emerged, and it has begun to take action. The United States, in part because it wants to share the burden of maintaining security with its allies, has encouraged Tokyo's efforts to take a more active role in regional and international security, commensurate with Japan's overall economic influence.

Concurrent with Japan's economic stagnation, the past two decades have seen the country quietly reform its Self-Defense Forces, expanding the allowable missions as it re-interprets the country's constitutionally mandated restrictions on offensive activity. For example, Japan has raised the status of the defense agency to the defense ministry, expanded joint training operations within its armed forces and with their civilian counterparts, shifted its views on the joint development and sale of weapons systems, integrated more heavily with U.S. anti-missile systems and begun deploying its own helicopter carriers.

Contest for East Asian Supremacy

China is struggling with the new role of the military in its foreign relations, while Japan is seeing a slow re-emergence of the military as a tool of its foreign relations. China's two-decade-plus surge in economic growth is reaching its logical limit, yet given the sheer size of China's population and its lack of progress switching to a more consumption-based economy, Beijing still has a long way to go before it achieves any sort of equitable distribution of resources and benefits. This leaves China's leaders facing rising social tensions with fewer new resources at their disposal. Japan, after two decades of society effectively agreeing to preserve social stability at the cost of economic restructuring and upheaval, is now reaching the limits of its patience with a bureaucratic system that is best known for its inertia.

Both countries are seeing a rise in the acceptability of nationalism, both are envisioning an increasingly active role for their militaries, and both occupy the same strategic space. With Washington increasing its focus on the Asia-Pacific region, Beijing is worried that a resurgent Japan could assist the United States on constraining China in an echo of the Cold War containment strategy.

We are now seeing the early stage of another shift in Asian power. It is perhaps no coincidence that the 1972 re-establishment of diplomatic relations between China and Japan followed U.S. President Richard Nixon's historic visit to China. The Senkaku/Diaoyu islands were not even an issue at the time, since they were still under U.S. administration. Japan's defense was largely subsumed by the United States, and Japan had long ago traded away its military rights for easy access to U.S. markets and U.S. protection. The shift in U.S.-China relations opened the way for the rapid development of China-Japan relations.

The United States' underlying interest is maintaining a perpetual balance between Asia's two key powers so neither is able to challenging Washington's own primacy in the Pacific. During World War II, this led the United States to lend support to China in its struggle against imperial Japan. The United States' current role backing a Japanese military resurgence against China's growing power falls along the same line. As China lurches into a new economic cycle, one that will very likely force deep shifts in the country's internal political economy, it is not hard to imagine China and Japan's underlying geopolitical balance shifting again. And when that happens, so too could the role of the United States.

EMU Plans Package Deal For Greece, Cyprus, Spain: Press

Πηγή: Forexlive
By MNI
Sept 23 2012

FRANKFURT (MNI) – Eurozone authorities are preparing a broad, multiple-nation bailout package including a modified program for Greece, a second bailout for Spain and a first program for Cyprus, Germany’s Financial Times Deutschland reported over the weekend, citing Eurozone sources.

Fresh support measures for the three countries could be negotiated and presented to national parliaments as a package by November at the latest, the newspaper reported.

A joint package is aimed at breaking resistance against additional concessions to Greece – particularly among German parliamentarians – by presenting a broad solution that could represent a breakthrough in the
debt crisis, the paper said.

Initially, decisions were scheduled to be taken in October. According to the report, however, Berlin is putting the brakes on closing aid-related deal at the next EU summit in mid-October.

Inspectors from the International Monetary Found, the European Central Bank and the European Commission – the so-called “Troika” – will not have concluded their report on Greece by the next Eurozone finance ministers’ meeting on October 8, the paper said.

According to a separate report in Der Spiegel Sunday, preliminary findings from the Troika show that Greece’s budget shortfall amounts to around E20 billion, almost the double of previous estimates.

However, a Greek Finance Ministry official in Athens said the gap was E13.5 billion, and that it would be bridged with E11.5 billion in spending cuts and E2 billion in new revenues.

Deadly Attack in Libya Was Major Blow to C.I.A. Efforts

Clothes and furniture piled outside the American mission in Benghazi, Libya, after a deadly attack. Among the personnel evacuated were about a dozen C.I.A. operatives and contractors.

Πηγή: New York Times
By ERIC SCHMITT, HELENE COOPER and MICHAEL SCHMIDT
Sept 23 2012

WASHINGTON — The attack in Benghazi, Libya, that killed Ambassador J. Christopher Stevens and three other Americans has dealt the Central Intelligence Agency a major setback in its intelligence-gathering efforts at a time of increasing instability in the North African nation.

Among the more than two dozen American personnel evacuated from the city after the assault on the American mission and a nearby annex were about a dozen C.I.A. operatives and contractors, who played a crucial role in conducting surveillance and collecting information on an array of militant armed groups in and around the city.

“It’s a catastrophic intelligence loss,” said one American official who has served in Libya and who spoke on the condition of anonymity because the F.B.I. is still investigating the attack. “We got our eyes poked out.”

The C.I.A.’s surveillance targets in Benghazi and eastern Libya include Ansar al-Sharia, a militia that some have blamed for the attack, as well as suspected members of Al Qaeda’s affiliate in North Africa, known as Al Qaeda in the Islamic Maghreb.

Eastern Libya is being buffeted by strong crosscurrents that intelligence operatives are trying to monitor closely. The killing of Mr. Stevens has ignited public anger against the militias, underscored on Friday when thousands of Libyans took to the streets of Benghazi to demand that the groups be disarmed. The makeup of militias varies widely; some are moderate, while others are ultraconservative Islamists known as Salafis and still others are loyalists from the government of Col. Muammar el-Qaddafi, the deposed Libyan leader.

“The region’s deeply entrenched Salafi community is undergoing significant upheaval, with debate raging between a current that is amenable to political integration and a more militant strand that opposes democracy,” Frederic Wehrey, a senior policy analyst with the Carnegie Endowment for International Peace who closely follows Libya and visited there recently, wrote in a paper this month,“The Struggle for Security in Eastern Libya.”

American operatives at the mission also assisted State Department contractors and Libyan officials in tracking shoulder-fired missiles taken from the former arsenals of Colonel Qaddafi’s forces; they aided in efforts to secure Libya’s chemical weapons stockpiles; and they helped train Libya’s new intelligence service, officials said.

Senior American officials acknowledged the intelligence setback, but insisted that information was still being collected using a variety of informants on the ground, systems that intercept electronic communications like cellphone conversations and satellite imagery. “The U.S. isn’t close to being blind in Benghazi and eastern Libya,” said an American official.

Spokesmen for the C.I.A., the State Department and the White House declined to comment on the matter on Sunday.

Within months of the start of Libyan revolution in February 2011, the C.I.A. began building a meaningful but covert presence in Benghazi, a locus of the rebel efforts to oust the government of Colonel Qaddafi.

Though the agency has been cooperating with the new post-Qaddafi Libyan intelligence service, the size of the C.I.A.’s presence in Benghazi apparently surprised some Libyan leaders. The deputy prime minister, Mustafa Abushagour, was quoted in The Wall Street Journal last week saying that he learned about some of the delicate American operations in Benghazi only after the attack on the mission, in large part because a surprisingly large number of Americans showed up at the Benghazi airport to be evacuated.

“We have no problem with intelligence sharing or gathering, but our sovereignty is also key,” said Mr. Abushagour.

The attack has raised questions about the adequacy of security preparations at the two American compounds in Benghazi: the American mission, the main diplomatic facility where Mr. Stevens and another American diplomat died of smoke inhalation after an initial attack, and an annex a half-mile away that encompassed four buildings inside a low-walled compound.

From these buildings, the C.I.A. personnel carried out their secret missions. The New York Times agreed to withhold locations and details of these operations at the request of Obama administration officials, who said that disclosing such information could jeopardize future sensitive government activities and put at risk American personnel working in similar settings around the world.

In Benghazi, both compounds were temporary homes in a volatile city teeming with militants, and they were never intended to become permanent diplomatic missions with appropriate security features built into them.

Neither was heavily guarded, and the annex was never intended to be a “safe house,” as initial accounts suggested. Two of the mission’s guards — Tyrone S. Woods and Glen A. Doherty, former members of the Navy SEALs — were killed just outside the villa’s front gate. A mortar round struck the roof of the building where the Americans had scrambled for cover.

Secretary of State Hillary Rodham Clinton announced last week the creation of a review board to examine the attacks. The board is to be led by a veteran diplomat and former undersecretary of state, Thomas R. Pickering.

The F.B.I. has sent investigators — many from its New York field office — to Benghazi, but they have been hampered by the city’s tenuous security environment and the fact that they arrived more than a day after the attack occurred, according to senior American officials.

Complicating the investigation, the officials said, is that many of the Americans who were evacuated from Benghazi after the attack are now scattered across Europe and the United States. It is also unclear, one of the officials said, whether there was much forensic evidence that could be extracted from the scene of the attacks.

Investigators and intelligence officials are now focusing on the possibility that the attackers were members of Al Qaeda in the Islamic Maghreb, or at least were in communication with the group during the four hours that elapsed between the initial attack at the mission and the second one at the mission’s annex.

Representative Mike Rogers, a Michigan Republican who heads the House Intelligence Committee, said on CNN’s “State of the Union” program on Sunday that there was “a high degree of probability that it is an Al Qaeda or Al Qaeda-affiliated group that had a very specific target in mind, and that was to attack the consulate and cause as much harm, chaos and death as possible.”

Foreign diplomats say that under security circumstances like those now in Libya, it is generally standard procedure to have a “safe house” in the vicinity of a main diplomatic facility that can be easily defended and evacuated.

“Normally, you try to keep the location of such a safe house secret, but in Benghazi right now, I think this was next to impossible,” Col. Wolfgang Pusztai, who until early August was Austria’s defense attaché to Libya and visited the country every month, wrote in an e-mail. “There are not too many foreigners hanging around, and it is quite easy to track them.”

BAE ready to quit deal if US ties at risk

Πηγή: FT
By Carola Hoyos in London and David Gelles
Sept 23 2012

BAE Systems has warned it will walk away from its proposed €35bn tie-up with EADS if the deal waters down its special relationship with the Pentagon.

“BAE will not do this deal if its Special Security Arrangement has to change to look more like that of EADS,” said one person close to BAE, in a sign of the complexities surrounding one of Europe’s largest and most sensitive industrial mergers in years.

This SSA, specifies that BAE’s senior leadership in the US is made up of Americans, among other things, and has allowed the UK’s biggest defence company to work on many lucrative US national security projects.

These include the $1,500bn F-35 joint strike fighter programme to develop the most advanced radar-evading jet fighter.

EADS also has an SSA, but it is stricter than BAE’s and means it has to ringfence sensitive projects so they are run by an American-led proxy company that releases minimal financial information to the parent company and forbids day-to-day control.

BAE’s arrangement has allowed it to grow into the largest and most trusted foreign military supplier in the US, where it makes $14bn in revenue and employs 40,000 people in about 40 states.

That makes it attractive to Franco-German EADS, which has been a less successful supplier employing about 3,000 people in a US business with revenues of $1.4bn.

BAE’s insistence that it does not want to change its SSA could prove problematic.

Several lawyers close to the US approval process believe Washington will not allow BAE to keep its more generous SSA if it merges with EADS, in which both France and Germany have either a direct or indirect stake.

A major sticking point is the concern that France could maintain a share of the new unified company even if it gives up its day-to-day influence – a step envisioned by Tom Enders, EADS chief executive.

“The [US] military would rather have a BAE than a combined BAE-EADS. BAE has been very successful in managing its US relationship. EADS is not in the same bucket, and a combined EADS-BAE is going to be treated a lot more like EADS than BAE,” says one lawyer who works on cases that go before the Committee on Foreign Investment in the United States (Cfius), which scrutinises the national security implications of foreign deals.

Europe’s largest aerospace company and its biggest defence contractor are in discussions over a potential merger that would create a rival to Boeing

He believes the deal could pass US hurdles, but not without sacrifice on BAE’s part. “If they’re willing to submit to tighter controls than BAE had, they might be able to get a deal done.”

Under the planned merger, EADS, the owner of Airbus, would end up controlling 60 per cent of a new global aerospace and defence group big enough to rival Boeing of the US, while BAE would have 40 per cent.

The deal is still being examined by the three governments most closely involved in the UK, Germany and France.

Both Berlin and Paris have either a direct or indirect stake in EADS, while the UK has a so-called “golden share” in BAE that means it can block a deal on national security grounds.

UK prime minister, David Cameron, is broadly supportive of a deal he thinks can benefit the British economy.

Angela Merkel, German chancellor, and François Hollande, France’s president, discussed the proposed merger at a meeting in Ludwigsburg, southern Germany, on Saturday, but did not reach any decisive conclusions.

Mr Hollande said both governments were seeking conditions covering “jobs, industrial strategy, defence activities, and our respective national interests”.

Officials expect discussions to intensify among the three governments in the coming days.